17 April, 2017

Demystifying Alexander Nahum Sack and the doctrine of odious debt

Eric
Tousaint’s study of the odious debt doctrine

by
Eric Toussaint

Part
18 - Sack’s comments on several debt repudiations and abolitions

As
examples of odious debts, Sack cites debts that have personally
enriched government representatives, and creditors’ dishonest
machinations: “We can also put into this category of debt, loans
clearly incurred in the personal interest of government members or
persons and groups related to government for purposes that are not
related to the government.” (p. 159) Sack says immediately
after this that debts of this kind were repudiated in the US in the
1830s, as we have seen. “Cf. the case of the repudiation of
certain debts by several North American States. One of the main
reasons justifying these repudiations was the squandering of the sums
borrowed: they were usually borrowed to establish banks or build
railways; but the banks failed and the railway lines were never
built. These questionable operations were often the result of
agreements between crooked members of the government and dishonest
creditors.” (p. 159) Note that in this particular case that
involved four different States, these debts were not incurred by
despotic governments.

Sack
gives another example “When a government incurs debt for the
purpose of subjugating the population of a part of its territory or
to colonise the same by its own colonists. These debts are odious for
the indigenous population of that part of the territory.” (p.
159)

Sack
mentions and comments on several cases. He starts by highlighting the
fact that among the reasons the US repudiated the debts that Spain
claimed on Cuba was that they had been used to maintain their
colonial domination over the Cuban people.

Then
Sack looks at two debt abolitions that were decided in application of
the Versailles treaty signed on 28 June 1919. The first concerned
German and Prussian debts incurred in order to colonise Poland and to
install Germans on land purchased from Poles. Following the defeat of
Germany an independent Poland was restored. The Versailles treaty
decreed that newly freed and independent Poland should not be held
liable for debt that had been used to impose its own colonisation and
subjugation. Sack had reservations about this proviso; he considered
that a part of the debt should not have been abolished because it was
not odious: “The borrowing of the Prussian government over the
thirty years of its colonial occupation was for the purpose of the
general budget or, at least, was not for odious purposes. These debts
cannot be considered as ‘odious’.” (p. 164)

Sack
then comments on a second debt abolition in the Versailles treaty.
The German empire was relieved of its African colonies and their
debts were abolished. However, the colonies were not emancipated –
they came under the control of the victorious powers. About this,
Sack cites an extract of the reply that the Allies made to Germany,
which was not inclined to accept forgiveness of the debt of its
ex-colonies, because Germany would have to continue the repayments
itself. The Allies replied: “The colonies should not bear any
portion of the German debt, nor remain under any obligation to refund
to Germany the expenses incurred by the Imperial administration of
the protectorate. In fact, it would be unjust to burden the natives
with expenditure which appears to have been incurred in Germany’s
own interest, and that it would be no less unjust to make this
responsibility rest upon the Mandatory Powers which, in so far as
they may be appointed trustees by the League of Nations, will derive
no benefit from such trusteeship.”

Here
are two more comments by Sack: “These considerations do not seem
to be totally founded. Even if the spending was done in German
interests it does not necessarily follow that it was odious for the
colonies (...)” (p. 162). He adds: “We can question
whether it is just, (...) that the colonial debt not be put to the
charge of the respective colonies, seeing that much of the funds were
used on productive spending in the colonies.” (p. 161).

What
really highlights Sack’s conservative, Eurocentric and colonialist
attitude is that he makes no reaction to the Allies’ affirmation
that they gain nothing from exercising their new protectorates over
Germany’s ex-colonies. What’s more, the Allies consider that
expenditures for the colonies were productive. Whereas, in fact, they
were used to rule over the peoples and to draw maximum profits
towards the colonial powers.